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March 2019

Franchisees across the scandal-ridden industry giant Retail Food Group are questioning how millions of dollars of advertising funds collected from them, across brands including Gloria Jeans, Michel’s Patisserie, Brumby’s and Donut King, are spent.

It comes as advertising funds across the $170 billion franchise sector are under scrutiny, with evidence building that some franchisors are misusing the funds to artificially boost profits. Some industry experts estimate that more than $1 billion a year is collected from franchisees in marketing fees.

Under the Franchising Code, a franchisor must prepare an annual financial statement for each advertising fund, detailing all the fund’s receipts and expenses for the past financial year then releasing a set of audited accounts.

It sounds good in theory, but the reality is the marketing fund accounts are often scant in detail, lack transparency and are left to the franchisor’s discretion, including how much they allocate to overheads and administrative costs. This lack of rigorous external governance means they can be easily manipulated and misused – and they are.

In October the competition watchdog, the Australian Competition and Consumer Commission, sent a note to 2500 members of the Franchising Information Network, reminding them about their obligations when it comes to marketing funds. It noted that a common source of tension in franchise networks was how marketing money was spent.

It’s not hard to see why. Franchisees contribute anywhere between 2 per cent to 6.5 per cent of gross sales to a marketing fund. When franchisees are struggling financially, and see little evidence of marketing support, resentment can build.

In the case of RFG, hundreds of its franchisees have gone to the wall but still contribute to marketing. Brumby’s requires a 3 per cent contribution, while Pizza Capers’ is a hefty 6.5 per cent.

Franchisees from Michel’s, Gloria Jeans, Brumby’s and Donut King claim they submitted complaints over the years to the ACCC requesting an investigation of RFG, including its treatment of the marketing fund.

In late 2015, a group of disgruntled Brumby’s franchisees formed a group known as the High Horses and wrote to the ACCC requesting help. In one letter it said: “If you review it nearly 60 per cent of the fund has been allocated to costs to offset those of the Franchisor like admin, operating expenses, rent! Whilst acceptable under the Franchising Code does it pass the ‘pub test’!”

Some Gloria Jeans franchisees have also complained. One franchisee who studied the latest marketing fund accounts questioned why marketing wages ballooned from more than $400,000 in 2015 to $2.35 million in 2017. He said administration expenses jumped from $54,000 in 2016 to $841,000 in 2017. “How is this possible, can you please explain and – again – send all relevant copies of invoices etc.”

Earlier this year, RFG shocked the market when it was forced to restate its accounts partly due to a change in the way RFG must treat expenditure previously charged to marketing funds (but not collected).

Its annual accounts revealed it was never justified in spending money out of the Michel’s marketing funding on supply-chain efficiencies. These supply-chain expenses had been booked as a receivable and passed on as a cost to franchisees. When franchisees couldn’t pay it, RFG wrote it off. But this time round it also restated its accounts in 2015 and 2016, which raised questions as to whether these amounts should have been booked as receivables in the first place.

Fairfax has obtained copies of the 2015, 2016 and 2017 marketing fund accounts for each of the brands. It found each marketing fund treated payroll differently, despite using the same auditor. For instance in Michel’s, payroll is lumped in with packaging as part of marketing expenses, while in Gloria Jeans’, payroll is separated out and included in administration expenses. This creates a very different picture of how much is being spent on advertising. RFG failed to respond to questions about the high payroll costs, their dramatic increases, or how many people worked in marketing on each brand.

There is much wrong with the franchise system. Agreements are drafted in favour of the franchisor, who can then slowly increase the heat. Marketing funds are one of the ways they can do it – and they do.

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Australian farmers have hit out at a new 30 per cent tariff introduced by the Indian Government on imported chickpeas and lentils, describing it as a “gut-wrenching” end to the season after battles with mice, frost and severe dry conditions during the year.

The move is a blow to Australian farmers because the crops are big earners, with the total value of all Australian chickpea exports in 2016-17 about $1.92 billion. Australian chickpea exports to India in 2016-17 were valued at more than $1.1 billion, while lentil exports were valued at almost $200 million.

Farmers also expressed frustration that the move by India went in the opposite direction to steps taken around the world to reduce trade barriers between nations.

In response to the new trade barrier, Australian farmers could have no choice but to grow less of the “premium” crops.

David Jochinke, president of the Victorian Farmers Federation, said a “drop in price was the primary concern”, as well as a drop in demand for the Australian products.

Asked how farmers felt about the new Indian tariff, Mr Jochinke said: “They’re absolutely gutted that this is going to be the case. They’re really hoping that the federal government can try to get a concession for Australian growers, or try to assist the Indian government to allow our imports to proceed without having the tariff.”

Mr Jochinke said Australia was a very large exporter of chickpeas and lentils, most of which went to the sub-continent.

Australia’s chickpea industry had grown strongly over the past decade, he said.

“We are asking the government to use the relationship its got with India to try to get a better deal for Australian farmers. Because in many regions (of Australia), chickpeas are the premium crops that people grow,” he said.

The crops are significant ones in Victoria, particularly in the fertile Wimmera district. In northern New South Wales, around Narrabri and Moree, chickpeas are a major crop.

“Because these are such important crops to us and so widely grown, farmers are looking for this to be resolved as quickly as possible,” Mr Jochinke said.

The tariff blow is something of a double-whammy to many growers, coming after a difficult year in which some battled severe dry conditions, frosts and mice problems. Some Victorian farmers lost so much crop to mice they had to re-sow entire paddocks, while some NSW crops were so dry they were not harvested.

For many growers, the crops are grown on a substantial scale. Mr Jochinke, who farms in the Wimmera, grew about 600 hectares of lentils and about 150 hectares of chickpeas.

“We got hit by frost as well, we lost about 70 per cent of our chickpeas to frost and about half of our lentils to frost. So we’ve been hit quite hard as far as production goes. And to have this come on top really does take the shine right off the season for them,” he said.

Derek Schoen, president of the New South Wales Farmers Association, said the Indian market was a “lucrative market” for Australian growers.

“It’s disappointing to see that India is moving to a more protectionist type policy setting. And it’s not just on pulses, it seems to be across the board that they are heading this way,” he said.

“The rest of the world seems to be moving to a more and more free trade type environment. And it’s not as though there is an enormous domestic production (in India), so it’s also going to force prices up in India as well,” he said.

Mr Schoen said the Indian market had strengthened in recent years, giving farmers more optimism to plant bigger crops.

“To sort of have the rug pulled from underneath them like this, it’s very unfortunate because people had geared up to higher production of chickpeas and lentils,” he said.

Figures from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) show that chickpea exports in 2016-17 were estimated at $1.92 billion.

But the forecasts for 2017-18 – released well before the tariff decision was revealed – are for a 32 per cent decline in the value of chickpea exports, to $1.31 billion. The volume of chickpea exports to India are projected to drop 27 per cent in 2017-18.

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To find any new comedy on Australian free-to-air channels these days is like looking for love on Tinder. You will spot a lot of dicks before striking gold with a talking vagina in a red sequinned dress.

That sassy lady garden belongs to Nakkiah Lui’s character in Kiki and Kitty, one of seven new short-form shows commissioned for the ABC’s new comedy channel.

They are not all gold – more on that later – but what they are is original content at a time when comedy on the commercial channels seems to be an endless stream of panel, quiz and reality shows, plus the unintentional comedy that is Channel Nine’s cricket commentary team.

Whereas the Brits and the Americans are able to pump out sitcoms at a steady rate, our commercial channels seem to have lost their taste for them, instead wallowing in endless Big Bang Theory repeats and self-flagellating with Matt LeBlanc’s latest effort (Man with a Plan – just don’t).

So it’s through that darkness that most of these new short-form comedies – Aussie Rangers, #CelesteChallengeAccepted, Kiki and Kitty, Other People’s Problems, Mychonny: The Chinaboy Show and Virgin Bush, plus new episodes of Fresh Blood – should be viewed. Yes, they are not perfect but they are new – new ideas, stories and faces. And they are worth watching.

Lui’s Kiki and Kitty is the perfect example. Not all of the jokes work, but where else will you find a talking vagina (the give-her-all-the-shows-now Elaine Crombie), a passionate ice-skating instructor (Rob Carlton), and a show’s writer and star, Lui, in bondage gear? Throw in barbed jokes about race (top marks to Harriet Dyer who plays Lui’s co-worker Cherise) and you have a comedy that wouldn’t get past the front door at Nine, Ten or Seven, but is the most original show seen in a long time.

Coming in a close second is the delightfully silly Aussie Rangers. Jon Bell (best known for Black Comedy, but he also wrote the under-appreciated Gods of Wheat Street) plays Wally Wilson, the head ranger of Black Stump National Park, who is on the hunt for the rare quokkacoot. Bell manages to cram more quality gags into each episode’s roughly six-minute running time than most long-form comedies.

Of the other new shows – Mychonny: The Chinaboy Show is great and features an unknown (to me) cast, and Other People’s Problems gets by on the strength of its star Maria Angelico.

The most disappointing is #CelesteChallengeAccepted, which turns Celeste Barber’s witty and original Instagram account that parodies ridiculous photos of celebrities into a fairly dull four-minute show.

That leaves Virgin Bush as the biggest dud. The premise is simple enough – city boy goes to regional Australia, meets the locals and cracks a few gags.

Unfortunately said city boy – comedian Neel Kolhatkar – is dead on arrival. His jokes are about as original as a photocopied piece of paper and his gormless mugging to camera only deepens the irritation. In the first episode (one of of four) he heads to the shearing sheds of Carinda in far northern NSW, where he (rightly) fails to impress the hard-as-nails boss Bronco.

A cringingly awkward trip to the pub is the icing on an undercooked cake. In the interests of fairness I pressed play on the second episode but lasted only two minutes.

As I said, it’s not all gold but it is an investment in Australian comedy, something the ABC should be applauded for and something the other free-to-air channels should try sometime.

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Chris Jordan, Commissioner of Taxation at the ATO, at the 2016 Self Managed Super Funds Conference, Adelaide Convention Centre, Adelaide, South Australia, Australia. Wednesday 18th February 2016. World Copyright: Daniel KaliszMore than year after a massive failure of Tax Office IT systems, a review has found the situation had a “disproportionately significant impact” on services because such a meltdown had not been planned for, while remediation efforts might not be effective.

An independent review by consulting firm PwC, released this month, found multiple component failures on a key data storage system on December 12, 2016, had caused the significant outage and blocked applications and services being available to members of the public.

In June, a separate report found technicians failed to effectively respond to the outages for nearly four hours, adding to chaos caused by warning and back-up systems that were not fully operational. Latest public service news

The new report found initial actions taken in response to the failure were not successful because of a previously unknown issue with one of the storage network components, a lower than expected “resilience posture” and some features having not being fully implemented.

The response was further hampered by the fact some control, management and monitoring systems were inaccessible because they were dependent on the hardware which had failed.

It said a level of residual risk still exists due to the absence of definitive evidence on the conditions that led to technical failures in the first place.

“Once notified, the ATO initiated escalation and response activities to remediate the issue and restore services as quickly as possible,” the report said.

“This response was generally executed in accordance with documented recovery and crisis management procedures, and included working with its service providers who supported the SAN and service management functions.

“Determination of the root cause of these component failures is subject to specific technical analysis which is yet to be completed by the service provider.”

A failure to plan for an incident of the nature and scale experienced in the crash had not been explicitly considered by the ATO or its external service providers, resulting in insufficient readiness levels for recovery.

In a statement responding to the report, an ATO spokesman said strong progress had been made to ensure ongoing performance of IT systems.

The PwC findings and a June report into the IT elements and business impacts of a string of recent systems outages are being considered.

“The ATO is well-advanced in implementing the recommendations of both reports, including fixing irritants and enhancing systems performance, refreshing the tax and BAS agent portal to better meet the needs of the tax profession and improving our IT design and governance.

“We will continue to build on this progress in 2018 to provide a better experience for all taxpayers, tax and super professionals, and digital service providers who use our systems,” the statement said.

Labor’s shadow assistant treasurer Andrew Leigh has called for explanations from the government, blaming 4600 job cuts for the failures.

This year’s tax period has seen 11.6 million tax returns lodged to date, up 4 per cent from the same time last year, as well as 8.7 million refunds issued, worth more than $26.3 billion.

The ATO said 81 million pieces of information have been pre-filled in tax returns, up 1 per cent from the same time in 2016.

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On Christmas night US time, Kim Kardashian West shared a series of images to her Instagram stories. The first one revealed her leg, which is healing very nicely from psoriasis.

The next was a close-up of a small box, which was filled with Amazon gift vouchers, a Disney Mickey toy, Apple headphones, Netflix gift cards and Adidas socks. At this point, Kim, intimated that she had to pretend to be touched, apparently telling her husband, “That’s so sweet!”

“But then” she continued, “I open the next box and it is stock to Amazon, where he got the gift card, stock to Netflix, stock to Apple where he got the headphones, Adidas stock and Disney stock.” She captioned the entire thing “Best husband alert”

According to reports, the stocks looked to be worth as much as $US200,000.

Kim Kardashian West has been married to her husband, Kanye West for almost four years now, and in those four years, West has always gone all-out on gifts. Who could forget the room of flowers this year? The wall of flowers for Mother’s Day in 2014? The $6 million ring that was sadly stolen in the French burglary?

But his most recent present to his wife reveals a lot, we think, about marriage — theirs, yours, ours, and the state of the world today. It also raises some tough questions we’re not sure we are ready to hear answers to just yet.

We know it’s hard to get the woman who has everything, (including a daughter on the way) anything meaningful. Walls of flowers are one thing, but flowers, as you may or may not be aware, die.

The tone of this gift might be read as West’s understanding and appreciation of his wife as a savvy business woman, something that is undeniably true.

But, may we put to you a counter theory: we understand from basic psychology that the infatuation stage of any relationship – also referred to as ” limerence” lasts for as little as 18 months or as long as three years, although it can last decades. We know the Wests have a pure, deeply romantic relationship, but we also know they are human, well, for the benefit of this article, let’s say they are.

Is Kanye West signalling, even in a sub-conscious sense, that he has exited limerence? Stocks, while sturdy, and a huge signifier of wealth, are still the rich man’s version of a voucher.

And so, in rich people terms, Kanye West just gave his wife a Target gift card.

Ummmm.

Gift cards and vouchers are what married people give each other when they feel secure; even cosy in a relationship. A more cynical person might call this stage “giving up”, a less cynical person might term it surrender. Whatever you want to call it, it’s a stage wherein surprises become few and far between, in favour of routine.

Vouchers are the greatest emblem of an almost sit-com version of “security” (AKA the underwear on the couch period) as they lack any sort of personal touch, or insight into your partner’s interests or passions. It is, simply put, a gift of convenience. West actually gave literal vouchers, but then it seems he thought better of it. Or did he?

Maybe this is all one big joke! Maybe. West has compared himself to Walt Disney and to Steve Jobs, so maybe these vouchers and stocks are symbolic of West’s inner life, his feelings about his own creative genius.

They might also be read as a tribute to the longevity of their marriage. Stocks are a big, long investment, after all. and this is the man who wrote the lyrics to Gold Digger – so giving money in any form to his partner is a sign of deep trust, and healing of past issues.

There is one more reading of the gift and this is the least favourable. West has spoken openly of being in serious debt. He once tweeted that he was $US53 million in debt, in fact. A month later, his wife informed the public that she had just earned $US80 million from her latest game app and was happy to transfer $US53 million into their joint account.

Is Kanye, um, poor? Is he so aware of his debt to his wife he knows that any gift he gives her is essentially spending her money? Has he been reduced, then, to gifting her stocks that he himself has held onto for his deals with Adidas, et al?

No, that is a terrible thought to have of icons such as these. They are the millennial Camelot, and for richer or poorer, we are committed.

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